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Monthly Archives: February 2016

No product lasts forever. Do you know where your small business product is in its product life cycle? Are you introducing tomorrow’s product, today?

The Product Life Cycle is a model that predicts the general trend that most successful products or services will follow during their lifetime. This lifecycle can be reviewed across an entire category, or in the context of an individual companies product. It is a strategy tool that helps companies plan for new product development and refine existing products

There are 4 stages to the lifecycle process shown in the table below. While decline can be avoided by reinventing elements of the product, it also recognizes that some products never move beyond the introduction phase whilst others move through the life cycle much faster than others.

What do the PLC stages mean?

Stage 1: Introduction

Introducing a new product where it’s unknown and products are small. The price is often higher as distribution is limited, and promotion is personalized.

Stage 2: Growth

Here, the product is being bought and with volume, the price declines. Distribution increases and promotion focuses on product benefits

Stage 3: Maturity

Here, the product competes with alternatives and pricing drops. Distribution becomes intense (it’s available everywhere) and promotion focuses on the differences to competitors’ products.

Stage 4: Decline

The product is reaching the end of its life and faces fewer competitors. The price may rise and distribution has become selective as some distributors have dropped the product. Promotion aims to remind customers of its existence.

How can I use this model?

When reviewing your business you need to understand which stage your products or services have reached across your portfolio of all products which can be assessed in terms of market share and growth using the BCG Matrix model. Reviewing the product of portfolio enables marketers to plan for new products, reinvent existing products or discontinue products that are in serious decline.

Time in each stage

The goal for your small business is to move your product through the ‘Introduction’ stage and the ‘Growth’ stage as quickly as possible in order to benefit for as long as possible from the profits that are available in the ‘Maturity’ stage. It is also important that when your product is clearly in the ‘Decline’ stage and cannot be revived that you discontinue it before it becomes loss making.

Multiple products

The ‘Product Life Cycle’ is most valuable when it is used to evaluate how well balanced the mix of your small business’s products are. For example if all of your products are in the ‘Decline’ stage of the life cycle then you are going to run out of income from sales but if all of your products are in the ‘Introduction’ stage you are probably going to be over extended and run out of cash.

Ideally you would have products at each stage of the life cycle so that as one moves from ‘Maturity’ and into ‘Decline’ another takes its place.

Quick Summary

Stage 1: Introduction

As a product is introduced there will usually be high costs in bringing it to market but low sales resulting in initial losses.

Stage 2: Growth

If the market decides it wants the product, sales increase; and unit costs decrease because of economies of scale. The product starts to become profitable at sales above the break-even point.

Stage 3: Maturity

Profits gradually increase as both demand peaks and costs continue to reduce because of efficiencies. Eventually competitors also enter the market with their own products in pursuit of these profits and this increased competition leads to a reduction in sales.

Stage 4: Decline

Sales and profits reduce significantly as the product comes to the end of its life and customers move to other products.

Running a business without a marketing plan is a bit like driving a car with your eyes closed. Without a plan, you have no direction on how you are going to grow your business and no objectives or activities planned to trigger that growth. This is why companies, investors and leaders all place value in building a marketing plan. However, if you haven’t created a market plan before you may find the process overwhelming. I’ll be honest, if you complete this correctly, it will not be a quick project, you will definitely spend some time on this. A well-researched, strategic marketing plan may take several weeks to complete and will consist of hours of research. While you may continue to operate without a formal plan – it will end up costing you more time, money and resources in the long run.

Businesses with plans succeed, outperform competitors, and retain staff, more than those with no plan. Marketing takes time, money and preparation, but the benefits outweigh the work. A strong marketing plan will ensure you’re not only sticking to your schedule, but that you’re spending your marketing funds wisely and appropriately.